Subject: INTRODUCTION TO MANAGEMENT ACCOUNTING

Search 500 + past questions and counting.

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

Question

a) BB Importers Ltd has been importing electrical gadgets through the port of Takoradi over the past ten years. Management is aware that the business has been facing seasonal fluctuations but there is no scientific basis for the determination of such variations that can be used to predict future revenue. As a newly recruited Cost Accountant, you have been provided with some past daily sales performance over a three-week period. Details of the sales performance are shown below:

Sales	Monday	Tuesday	Wednesday	Thursday	Friday
Week 1	780	830	890	850	850
Week 2	880	930	990	950	950
Week 3	980	1030	1090	1050	1050

Required:
Using daily moving averages, calculate the daily variation for the company. (15 marks)

b) The reasons for variances might be connected, and two or more variances may arise from the same cause. For example, a favorable variance and an adverse variance might have the same cause.

Required:
Explain the interrelationships between:
i) Material price and usage variances (2.5 marks)
ii) Labor rate and efficiency variances (2.5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Material Price Variance, Moving Averages, Sales Forecasting, Usage Variance
Level: Level 1

Topic: Forecasting, Standard Costing and Variance Analysis
Series: MAR 2024

IMAC – MAR 2024 – L1 – Q4 – Standard Costing and Variance Analysis

Distinguish between joint products and by-products, prepare a process account and income statement for Odotobiri Ltd

Question

a) Distinguish between joint product and by-product. (5 marks)

b) Odotobiri Ltd produces joint products (X, Y) from an identical manufacturing process. In December 2023, 11,000kg of materials were put into the production process. The total costs of processing (direct materials and conversion costs) were GH¢100,000. Output was 6,000 units of product X and 4,000 units of product Y and 1,000 units of a by-product Q. X has a sales value of GH¢24 per unit and Y has sales value of GH¢12 per unit. By-product Q has a sales value of GH¢1 per unit. The company has a policy to apportion joint costs based on sales value at a split-off point. 80% of the output of both X and Y was sold by the month-end.

Required:
i) Extract the Process Account. (6 marks)
ii) Prepare the Income Statement. (4 marks)

c) Controlling through standards and standard costing is a creative technique for company
managers to determine whether the organisation’s resources are being used effectively.
Standard costs are typically determined during budgetary control process because they
employ predetermined standard cost for direct material, direct labour, and factory overhead.
Required:
Explain FOUR (4) uses of standard costing.

Answer

Find Related Questions by Tags, levels, etc.

Tags: By-Products, Income Statement, Joint Products, Process Account, Standard Costing
Level: Level 1

Topic: Standard Costing and Variance Analysis
Series: MAR 2024

IMAC – MAR 2024 – L1 – Q3 – Job Costing

Explain decision-making levels within an organization, sources of management accounting information, and factors for an effective job costing system.

Question

a) Management accounting is the provision of financial and non-financial decision-making information to managers.

Required:
i) Explain the decision-making levels within an organization and state an example each of the kind of decision taken at the various levels. (9 marks)
ii) Explain TWO (2) sources of management accounting information and state an example each of the information to be obtained. (6 marks)

b) One form of specific order costing methods that seeks to attribute costs to jobs is known as job costing.

Required:
Enumerate THREE (3) factors that are necessary to ensure an effective and workable job costing system. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Decision-Making Levels, Job Costing System, Sources of Management Accounting Information
Level: Level 1

Topic: Job Costing
Series: MAR 2024

IMAC – MAR 2024 – L1 – Q2 – Budgeting

Explain the steps in the annual budgeting process, conditions for successful budget implementation, and identify short-term investment options available to Komba Ltd.

Question

Komba Ltd is a manufacturing company that wants to allocate some funds for short and long-term investments. To support this purpose, Komba Ltd is organizing its annual budget preparation for the coming year. Some senior management of the company are wondering what the budgeting process is about and would be interested in having a better understanding of the annual budgeting process.

Required:
As the cost accountant of Komba Ltd:
a) Explain FIVE (5) steps to be involved in the annual budgeting process. (10 marks)
b) State FIVE (5) conditions for a successful implementation of a budgeting process. (5 marks)
c) Explain TWO (2) short-term investments available to Komba Ltd. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Implementation, Budgeting Process, Short-Term Investments
Level: Level 1

Topic: Budgeting
Series: MAR 2024

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

Question

a) Atimbila Ltd manufactures a product that goes through various workshops. The following budgeted overheads for the year 2023, based on normal activity levels, have been provided:

Workshop	Budgeted Overheads (GH¢)	Overhead Absorption Base
Forming	360,000	30,000 labour hours
Machining	860,000	50,000 machine hours
Welding	400,000	36,000 labour hours
Assembly	300,000	20,000 labour hours

Selling and administrative overheads are 25% of factory cost.

An order for 5,000 units of the product (Batch 3391) incurred the following costs on 31 August 2023:

Materials: GH¢62,140
Labour:
- 1,280 hours forming shop at GH¢10.50 per hour
- 4,520 hours machining shop at GH¢11 per hour
- 900 hours welding shop at GH¢10.50 per hour
- 1,750 hours assembly shop at GH¢9.60 per hour
An amount of GH¢1,050 was paid for the hire of a special X-ray equipment for testing the welds. The time booking in the machine shop was 6,430 machine hours. Selling price was GH¢150 per product.

Required:
i) Compute the total cost of the batch. (10 marks)
ii) Calculate the unit cost per product. (1 mark)
iii) Determine the profit per product. (1 mark)

b) The following cost and production data relates to the operations of Mawuga Ltd over a two-year period:

Year	Production (units)	Total Costs (GH¢)
2022	50,000	1,700,000
2023	54,000	1,835,400

Between 2022 and 2023, there has been a 5% cost inflation.

Required:
i) Calculate the real fixed and variable costs. (6 marks)
ii) Estimate what the total costs will be in 2024 if it is expected that there will be 4% cost inflation and output will be 56,000 units. (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Batch Costing, Cost Estimation, Overhead Absorption, Real Fixed Costs, Variable Costs
Level: Level 1

Topic: Cost and Cost Behaviour
Series: MAR 2024

IMAC – NOV 2023 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Determine the trend and seasonal variation in sales using moving averages and calculate factors for estimating direct material costs.

Question

a) A company operates from Monday to Friday. Sales data for the most recent three weeks as well as the moving total are as follows:

Day	Sales	Moving Total
Day 1	78
Day 2	83
Day 3	89	420
Day 4	85	430
Day 5	85	440
Day 6	88	450
Day 7	93	460
Day 8	99	470
Day 9	95	480
Day 10	95	490
Day 11	98	500
Day 12	103	510
Day 13	109	520
Day 14	105
Day 15	105

Required:
i) State the length of the cycle. (2 marks)
ii) Using the moving averages, establish the trend of the historical data above. (6 marks)
iii) Calculate the seasonal variation for each day of the week. (7 marks)

b) The value of variances as a control technique for management depends on the reliability and accuracy of the standard costs. If the standard costs are inaccurate, comparisons between actual cost and standard cost will have no meaning.

Required:
Explain TWO (2) factors to be considered by the purchasing department in estimating the direct material costs per unit of raw material. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Direct Material Costs, Moving Averages, Sales Forecasting, Seasonal Variation
Level: Level 1

Topic: Forecasting, Standard Costing and Variance Analysis
Series: NOV 2023

IMAC – NOV 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis

Calculate closing inventory using FIFO and compute direct material price and usage variances for Prekese and Kakaduro.

Question

a) The following data has been extracted from the books of ABC Ltd for the month of October 2023.

Date	Description
2/10/2023	Bought 200 units @ GH₵100 per unit
5/10/2023	Bought 150 units @ GH₵120 per unit
8/10/2023	Issued 120 units
12/10/2023	Bought 100 units @ GH₵90 per unit
20/10/2023	Issued 140 units
24/10/2023	Bought 300 units @ GH₵150 per unit
28/10/2023	Issued 210 units

Required:
Using the FIFO method, calculate the value of the closing inventory. (10 marks)

b) Identify FOUR (4) pieces of information that can be seen on an invoice. (5 marks)

c) Preka body lotion is a product produced from the combination of two materials: prekese and kakaduro. Preka body lotion has a standard direct material cost as follows:

Material	Quantity (kg)	Cost per kg (GH₵)	Total Cost (GH₵)
Prekese	6	15	90
Kakaduro	10	10	100

During period one, 1,000 units of Preka body lotion were manufactured, using 11,700 kilograms of prekese and 10,000 kilograms of kakaduro, costing GH₵98,600 and GH₵78,000 respectively.

Required:
Calculate the following variances for prekese and kakaduro:
i) The direct material price variance (2.5 marks)
ii) The direct material usage variance (2.5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: FIFO, Inventory Valuation, Material Price Variance, Material Usage Variance
Level: Level 1

Topic: Accounting for Inventory and Labour, Standard Costing and Variance Analysis
Series: NOV 2023

IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting

Discuss changes in the business environment affecting management accounting, differences between financial and management accounting, and the benefits of a cost and management accounting system.

Question

a) Management accounting can be described as the process of supplying the managers and employees in an organization with relevant information, both financial and non-financial, for making decisions, allocating resources, monitoring, evaluating, and rewarding performance.

Required:
In relation to the description of management accounting provided above:
State THREE (3) important changes that have taken place in the business environment that have influenced management accounting practice. (3 marks)

b) Financial Accounting and Management Accounting share important similarities since both are based on financial information and other quantitative information about business operations.

Required:
Identify FOUR (4) differences between financial accounting and management accounting. (4 marks)

c) Mr. Osei Nyarko, an engineer by training, established Kotmat Ltd three years ago with five employees. His only source of information concerning the performance of Kotmat Ltd has been the half-yearly financial statements, which he receives ten weeks after the end of each half-year. A proposal has been submitted to Mr. Osei Nyarko to install a cost and management accounting system.

Required:
i) Identify FOUR (4) benefits Mr. Nyarko will derive from installing a cost and management accounting system. (4 marks)
ii) Enumerate FOUR (4) types of information which could be obtained from the cost and management accounting system that cannot be obtained from the current system. (4 marks)

**d) State and explain TWO (2) useful pieces of information generated by marginal and absorption costing systems. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business Environment, Cost and Management Accounting System, Financial Accounting, Management Accounting
Level: Level 1

Topic: Scope of Management Accounting
Series: NOV 2023

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

Question

a) As organisations become larger and more complex, it is no longer possible for just one person to prepare a budget. Instead, budgeting across the organisation must be carefully coordinated among various actors. As a result, there is the need for a budget manual irrespective of the type of or approach to budgeting.

Required:
i) State FIVE (5) contents of a budget manual. (5 marks)
ii) Write short notes on the following:

Incremental budget. (2.5 marks)
Zero-Based Budget. (2.5 marks)

b) Chico Ltd, a newly established manufacturing company with branches across Africa is preparing its first annual budget. The following information is relevant:

Sales forecast for each month:

Month	Sales Forecast (GH₵)
January to June	20,000
July to December (and thereafter)	22,000

Gross profit margin: 20%
Credit given to customers: 2 months
Credit taken from suppliers: 2 months
Closing inventory: 3 months of demand
Monthly operating expenses: GH₵1,222

At the start of the budget period, a non-current asset with a cost of GH₵120,000 and a useful life of 6 years was purchased and transferred to one of its branches. In addition, a cash amount of GH₵80,000 was provided for the operations of Chico Ltd.

Required:
Prepare the budgeted statement of profit or loss and budgeted statement of financial position for Chico Ltd. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Manual, Budgeted Financial Position, Budgeted Profit or Loss, Incremental Budget, Zero-Based Budget
Level: Level 1

Topic: Budgeting
Series: NOV 2023

IMAC – NOV 2023 – L1 – Q1 – Marginal Costing and Absorption Costing

Prepare profit statements for January and February 2023 using marginal costing and absorption costing methods.

Question

Alokome Plc is a company that produces and sells one product “Iga”. Information relating to the operations of Alokome Plc for the first two months of 2023 is as follows:

i) Iga sells for GH₵500 per unit.
ii) There were no inventories of Iga at the end of December 2022.
iii) Other relevant information is as follows:

Cost Element	GH₵
Direct material and wages	220
Variable production overhead	30

Budgeted and actual costs per month:

Cost Element	GH₵
Fixed production overhead	990,000
Fixed selling and administrative expenses	400,000
Variable selling expenses	12.5% of sales

Normal capacity: 110,000 units per month

Number of units produced and sold:

Month	Sales (units)	Production (units)
January	128,000	140,000
February	110,000	102,000

Required:
Using the information above, prepare in a columnar form profit statements for January and February 2023 using:
a) Marginal costing (10 marks)
b) Absorption costing (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Absorption Costing, Marginal Costing, Over/Under Absorption, Profit Statement
Level: Level 1

Topic: Marginal Costing and Absorption Costing
Series: NOV 2023

IMAC – JULY 2023 – L1 – Q5 – Budgeting | Forecasting

Prepare seasonally adjusted sales forecast and production overheads budget, and explain key components of time series analysis.

Question

Question:
a) Balan Ltd is engaged in manufacturing and selling a single product and is in the process of preparing its budget for 2024. The following information is available:

Sales:
Balan Ltd has developed the linear relationship Y = 20,000 + 4,000X, where X represents the time period (X = 1 for the 1st quarter of 2024) and Y represents the sales trend in units.

The following seasonal variations are required to be adjusted to the sales trend in order to arrive at the sales forecast:

Quarter	Jan-Mar	Apr-Jun	Jul-Sep	Oct-Dec
Index value	110	90	80	120

A unit of product can be sold at GH¢1,000 during the first three quarters, and this price will be increased by 10% in the fourth quarter of 2024.

Production Overheads:
Based on the past 6 quarters’ results, the following statistical data has been gathered:
n = 6 (where ‘n’ is the number of quarters considered)
∑X = 306 (where ‘X’ is the production quantity in thousands of units)
∑Y = 146,400 (where ‘Y’ is the total production overheads in GH¢ thousands)
∑XY = 7,578,400
∑X² = 15,886

Balan Ltd estimates a linear relationship between output (X) and production overheads (Y), and the total production overheads can be expressed as Y = a + bX.

Balan Ltd does not maintain finished goods inventories. You are one of the Management Accounting executives of Balan Ltd and have been requested to assist in compiling budget figures.

Required:
i) Prepare the seasonally adjusted quarterly sales forecast in unit and in value for the calendar year 2024. (4 marks)
ii) Prepare the quarterly production overheads budget for the calendar year 2024. (5 marks)

b) Explain the following terms:
i) Trend-Cycle (C) (2 marks)
ii) Seasonal Components (S) (2 marks)
iii) Irregular Components (I) (2 marks)

c) The purpose of Management Accounting is to provide information for planning, control, and decision making. Information for control of the performance is an important management task.

Required:
Outline THREE (3) activities involved in providing information for control purposes. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Irregular Components, Production Overheads Budget, Sales Forecasting, Seasonal Components, Trend-Cycle
Level: Level 1

Topic: Budgeting, Forecasting
Series: JULY 2023

IMAC – JULY 2024 – L1 – Q4 – Cost-Volume-Profit (CVP) Analysis

Calculate overhead absorption rates, explain under and over absorbed overheads, and discuss the effect of over absorbed overhead on profit and CVP analysis assumptions.

Question

a) The statement below shows the summary of overheads that have been apportioned to the four departments operating in MMS Ltd with additional information.

Department	1	2	3	4
Total overheads (GH¢)	45,000	35,000	20,000	40,000
Labour hours	1,200	1,000	800	1,500
Units produced	8,000	6,000	4,000	7,000
Machine hours	2,500	3,000	1,800	4,000
Prime cost per unit (GH¢)	42	25	30	34

Required:
i) Calculate THREE (3) plant-wide (blanket) overhead absorption rates. (6 marks)
ii) Calculate TWO (2) overhead absorption rates for department 1. (3 marks)

b) Explain under and over absorbed overheads. (3 marks)

c) State the effect of over absorbed overhead on reported profit. (3 marks)

d) State FOUR (4) assumptions underlying cost-volume-profit (CVP) analysis. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: CVP Assumptions, Overhead Absorption Rate, Profit Impact, Under and Over Absorbed Overheads
Level: Level 1

Topic: Cost-Volume-Profit (CVP) Analysis
Series: JULY 2023

IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis

Discuss differences between private and public sector entities and calculate standard costing variances for materials, labour, and overheads.

Question

a) Public Sector in Ghana includes the Metropolitan, Municipal and District Assemblies
(MMDA’s) and the Ministries, Departments and Agencies (MDA’s). The private sector
dominates in terms of numbers and are significantly different in operations from the public
sector.
Required:
In reference to the above statement, explain FOUR (4) key differences between a private
sector entity and a public sector entity. (10 marks)
b) Konka Ltd produces a product – “the telescope”.
Actual results for the period were:
Production: 430 units made
Materials: 1,075 kg were used.
1,200 kg of materials were purchased at a cost of GH¢17,700
Direct labour: 1,700 hours were worked at a cost of GH¢14,637
Variable production overheads expenditure: GH¢3,870.

The standard cost card for the product is as follows:
GH¢
Direct material 2 kg x GH¢15 30
Direct labour 4hrs x GH¢8.50 34
Variable overhead 4hrs x GH¢2.00 8
The cost card is based on production and sales of 450 units in each period.
The company values its inventories at standard cost.
Required:
Calculate the following variances for Konka Ltd:
i) Material price variance
ii) Material usage variance
iii) Labour rate variance
iv) Labour efficiency variance
v) Variable overhead expenditure variance
(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Labour Efficiency Variance, Labour Rate Variance, Material Price Variance, Material Usage Variance, Private Sector, Public Sector, Variable Overhead Variance
Level: Level 1

Topic: Standard Costing and Variance Analysis
Series: JULY 2023

IMAC – JULY 2023 – L1 – Q2 – Budgeting | Marginal Costing and Absorption Costing

Explain types of budgeting and prepare a flexible budget for cost control, including variance analysis.

Question

a) Explain the following:
i) Incremental Budgeting (2 marks)
ii) Zero-Based Budgeting (2 marks)
iii) Activity-Based Budgeting (2 marks)

b) Cox Ltd is a manufacturing company that produces a body shaping drink for the African market. The company employs a marginal costing system as an integral part of its reporting systems. During the reporting period, there was no opening or closing inventory. The company produces its budgeted and actual results for December 31, 2022, as follows:

	Budget	Actual
Production/sales (units)	2,000	1,400
Sales (GH¢)	60,000	42,400
Variable Costs:
Direct material (GH¢)	(20,000)	(13,200)
Direct labour (GH¢)	(10,000)	(7,600)
Variable overhead (GH¢)	(6,000)	(4,400)
Contribution (GH¢)	24,000	17,200
Fixed cost (GH¢)	(20,000)	(20,800)
Net profit/loss (GH¢)	4,000	(3,600)

Required:
Prepare a budget that will be useful for management cost control purposes and briefly comment on the company’s performance in December 2022. (14 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Activity Based Budgeting, Cost Control, Flexible Budget, Incremental Budgeting, Zero-Based Budgeting
Level: Level 1

Topic: Budgeting, Marginal Costing and Absorption Costing
Series: JULY 2023

IMAC – MAR 2023 – L1 – Q5 – Budgeting | Cost Segregation and Estimation

Explain cost estimation in budgeting, prepare sales and production budgets, and calculate variable and fixed overheads using the high-low method.

Question

a) Cost estimation techniques play an important role in budget preparation.

Required:
Explain the statement above. (3 marks)

b) Obsaw Ltd is in the process of preparing budgets for the year 2021. Based on past experience, the following trend equation has been developed in the year 2019 for the estimation of quarterly sales:

S = 21,900 + 900Q
Where, S = quarterly sales in units
Q = time period (Quarter I of year 2019 is time period 1)

The following set of seasonal variation index values has been derived using a multiplicative model, based on year 2019 actual sales:

Quarter of the calendar year	Q1	Q2	Q3	Q4
Seasonality	-30%	-10%	+30%	+10%

The management expects that the above trend and seasonal effect will continue until year 2023.
The company’s policy is to maintain a finished goods inventory of 20% of the demand for the following month. Monthly sales in each quarter are evenly distributed.

Required:
i) Prepare the quarterly sales budget (in units) for the calendar year 2021. (4 marks)
ii) Prepare the quarterly production budget (in units) for the calendar year 2021. (3 marks)

c) Obsaw Ltd recorded the highest and the lowest production overheads (POHs) during the year 2020 as follows:

Production (units)	POHs (GH¢ million)
Highest	37,000
Lowest	18,000

POHs are expected to increase by 10% per year and fixed production overheads are absorbed to products based on the budgeted production.

Required:
i) Using the high-low method, prepare the quarterly variable production overheads budget for the year 2021. (Use the production budget in b) ii) above.) (3 marks)
ii) Calculate the fixed production overheads absorption rate per unit for the year 2021. (2 marks)

d) Explain how standard costs for material and labour might be compiled. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Estimation Techniques, Overhead Budget, Production Budget, Sales Budget, Standard Costing
Level: Level 1

Topic: Budgeting, Cost Segregation and Estimation
Series: MAR 2023

IMAC – July 2023 – L1 – Q1 – Cost-Volume-Profit (CVP) Analysis | Process Costing

Prepare the Process Account for Omicron vaccine production and calculate the break-even point and required units to achieve target profit before and after tax

Question

a) Adom Ltd manufactures Omicron vaccine for the treatment of COVID-19 in Africa. The manufacturing process uses two raw materials (M & W) which are mixed in the proportions (2:3). Materials are priced: M = GH¢10 per kg and W = GH¢3.2 per kg. Normal weight loss of 5% of material input is expected during the process, and material losses recorded in the manufacturing process have no saleable value. At the end of production, 18,260 kg of Omicron vaccine were manufactured from 19,320 kg of raw materials. Conversion costs in the period were GH¢57,316. There was no work in process at the beginning or end of the period.

Required:
Prepare the Process Account of the Omicron vaccine for the period. (10 marks)

b) Manna Industries sold 150,000 units of its product at GH¢20 per unit. Variable costs are GH¢15 per unit (manufacturing cost of GH¢12 and selling expenses of GH¢3). Fixed costs are incurred uniformly throughout the year and amount to GH¢972,000, that is, manufacturing costs of GH¢600,000 and selling expenses of GH¢372,000.

Required:
i) Calculate the break-even point in units and Ghana cedis. (4 marks)
ii) Calculate the number of units that must be sold to earn an income of GH¢75,000 before income tax. (2 marks)
iii) Calculate the number of units that must be sold to earn an after-tax profit of GH¢100,000 if the income tax rate is 40%. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: After-tax Profit, Break-even Analysis, Process Costing, Target Profit
Level: Level 1

Topic: Cost-Volume-Profit (CVP) Analysis, Process Costing
Series: JULY 2023

IMAC – MAR 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis

Discuss tasks suitable for piece rate and hourly rate payment systems and compute labor variances and standard costing variances.

Question

a) Employees may be paid either using piece rate or hourly rate.

Required:
In reference to the statement above, state THREE (3) tasks/jobs that:
i) Piece rate may be used. (3 marks)
ii) Hourly rate may be used. (3 marks)

b) Krenkren enterprise uses the hourly rate to pay her employees. The current rate is GH¢6 per hour. However, employees are paid 1.5 times for each overtime hour worked. Each employee is to work a minimum of 40 hours a week without a guaranteed payment. Any extra hour will attract overtime rate.

Extract from the time sheet for a week has been provided below:

Name	Staff Number	Hours worked
Kwame Sarfo	H 1356	56
John Addae	H 3456	38
Thomas Appia	F 2254	48
Rose Danso	F 8645	50

Required:
Calculate the basic pay for each of the staff. (9 marks)

c) The following standard costs apply to the manufacture of a product by Pontir Ltd:

Standard weight to produce one unit: 12 kgs
Standard price per kg: GH¢9
Standard hours to produce one unit: 10
Standard rate per hour: GH¢4

Actual production and costs for one accounting period were:

Cost Element	Actual Usage	Actual Cost (GH¢)
Material	3,770 kgs	35,815
Labour	2,755 hours	11,571

The actual output was 290 units.

Required:
Calculate relevant material and labor cost variances and present these in a format suitable for presentation to the management of Pontir Ltd. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Hourly Rate, Labor Cost, Piece Rate, Standard Costing, Variance Analysis
Level: Level 1

Topic: Accounting for Inventory and Labour, Standard Costing and Variance Analysis
Series: MAR 2023

IMAC – MAR 2023 – L1 – Q3 – Marginal Costing and Absorption Costing | Scope of Management Accounting

Explain qualities of management accounting information, and differences between marginal and absorption costing.

Question

a) Management accounting systems obtain information from both internal and external sources. Cost accounting system is one major source of management accounting information, and such information is only useful to managers if it possesses certain qualities.

Required:
In reference to the statement above, explain FIVE (5) qualities of management accounting information.
(10 marks)

b) Explain the following briefly:
i) Cost center (2.5 marks)
ii) Profit center (2.5 marks)

c) Explain TWO (2) differences between a marginal costing system and an absorption costing system.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Absorption Costing, Cost Center, Management Information, Marginal Costing, Profit Center
Level: Level 1

Topic: Marginal Costing and Absorption Costing, Scope of Management Accounting
Series: MAR 2023

IMAC – Mar 2023 – L1 – Q2 – Budgeting | Cost and Cost Behaviour

Prepare functional budgets for sales, production, and direct material purchases for Naa Sei enterprise.

Question

Naa Sei enterprise wishes to prepare his functional budgets for the year 2023. The following information has been provided.

Sales

Year	Quarter	Units
2023	1	1,200
2023	2	1,500
2023	3	2,000
2023	4	1,800

2024

Year	Quarter	Units
2024	1	2,200
2024	2	2,300

The projected selling price is GH¢15 for the first two quarters, and this will increase by 10% in the third quarter. There will be no further price increase.

Inventory policy
i) Finished Goods: The company plans to keep 10% of the following quarter’s sales quantity. The opening inventory of finished goods is 120 units.
ii) Direct Materials: Only one material is used in production. 5 kilograms of the material are required for the production of a unit of a product. Closing inventory is expected to be 20% of the following quarter’s requirement. The cost of material is expected to be GH¢2 per kilogram.

Required:
Prepare the following functional budgets for each of the four quarters in 2023.
a) Sales
b) Production
c) Direct material purchases in value

Answer

Find Related Questions by Tags, levels, etc.

Tags: Direct Material Purchases, Functional Budgets, Production Budget, Sales Budget
Level: Level 1

Topic: Budgeting, Cost and Cost Behaviour
Series: MAR 2023

IMAC – Mar 2023 – L1 – Q1 – Pricing

Calculation of the production cost and selling price per loaf of bread, including direct materials, labor, and overheads.

Question

Mootomooto Bakery produces bread that is sold by agents within the Kumasi Metropolis.

For every batch of bread, 15 bags of flour are used. Below are details of the cost of processing a batch of bread:

i) Direct materials:

Flour: 15 bags at GH¢220 per bag.
Sugar: 10 kilograms at GH¢15 per kilogram
Margarine: 20 kilograms at GH¢25 per kilogram
Egg: 1 crate at GH¢30 per crate

Other direct materials: GH¢550

ii) Direct expenses: GH¢650.
iii) Direct Labour per batch: 20 contract workers, each works for 6 hours to be paid GH¢6 per hour.
iv) Fixed overheads: The details of monthly production overheads, which are absorbed per number of bags of flour produced, are given below:

Description	Amount (GH¢)
Salaries	32,000
Depreciation	8,000
Light and power	15,000
Rent and rates	7,500
Sanitation	5,500
Office expenses	12,000

It is estimated that 2,500 bags of flour will be baked in a month.

v) Administrative expenses: Administrative expenses are estimated at 10% of production cost.
vi) Commission on sales and distribution expenses: 8% of the selling price.

Required:
a) Calculate the production cost of a loaf of bread if each bag yields 120 loaves. (12 marks)
b) Calculate the selling price per loaf if profit is 14% of selling price. (8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Level: Level 1

Topic: Pricing
Series: MAR 2023

Subject: INTRODUCTION TO MANAGEMENT ACCOUNTING

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

You're reporting an error for "IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis"

IMAC – MAR 2024 – L1 – Q4 – Standard Costing and Variance Analysis

Distinguish between joint products and by-products, prepare a process account and income statement for Odotobiri Ltd

You're reporting an error for "IMAC – MAR 2024 – L1 – Q4 – Standard Costing and Variance Analysis"

IMAC – MAR 2024 – L1 – Q3 – Job Costing

Explain decision-making levels within an organization, sources of management accounting information, and factors for an effective job costing system.

You're reporting an error for "IMAC – MAR 2024 – L1 – Q3 – Job Costing"

IMAC – MAR 2024 – L1 – Q2 – Budgeting

Explain the steps in the annual budgeting process, conditions for successful budget implementation, and identify short-term investment options available to Komba Ltd.

You're reporting an error for "IMAC – MAR 2024 – L1 – Q2 – Budgeting"

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

You're reporting an error for "IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour"

IMAC – NOV 2023 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Determine the trend and seasonal variation in sales using moving averages and calculate factors for estimating direct material costs.

You're reporting an error for "IMAC – NOV 2023 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis"

IMAC – NOV 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis

Calculate closing inventory using FIFO and compute direct material price and usage variances for Prekese and Kakaduro.

You're reporting an error for "IMAC – NOV 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis"

IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting

Discuss changes in the business environment affecting management accounting, differences between financial and management accounting, and the benefits of a cost and management accounting system.

You're reporting an error for "IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting"

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

You're reporting an error for "IMAC – NOV 2023 – L2 – Q2 – Budgeting"

IMAC – NOV 2023 – L1 – Q1 – Marginal Costing and Absorption Costing

Prepare profit statements for January and February 2023 using marginal costing and absorption costing methods.

You're reporting an error for "IMAC – NOV 2023 – L1 – Q1 – Marginal Costing and Absorption Costing"

IMAC – JULY 2023 – L1 – Q5 – Budgeting | Forecasting

Prepare seasonally adjusted sales forecast and production overheads budget, and explain key components of time series analysis.

You're reporting an error for "IMAC – JULY 2023 – L1 – Q5 – Budgeting | Forecasting"

IMAC – JULY 2024 – L1 – Q4 – Cost-Volume-Profit (CVP) Analysis

Calculate overhead absorption rates, explain under and over absorbed overheads, and discuss the effect of over absorbed overhead on profit and CVP analysis assumptions.

You're reporting an error for "IMAC – JULY 2024 – L1 – Q4 – Cost-Volume-Profit (CVP) Analysis"

IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis

Discuss differences between private and public sector entities and calculate standard costing variances for materials, labour, and overheads.

You're reporting an error for "IMAC – JULY 2023 – L1 – Q3 – Standard Costing and Variance Analysis"

IMAC – JULY 2023 – L1 – Q2 – Budgeting | Marginal Costing and Absorption Costing

Explain types of budgeting and prepare a flexible budget for cost control, including variance analysis.

You're reporting an error for "IMAC – JULY 2023 – L1 – Q2 – Budgeting | Marginal Costing and Absorption Costing"

IMAC – MAR 2023 – L1 – Q5 – Budgeting | Cost Segregation and Estimation

Explain cost estimation in budgeting, prepare sales and production budgets, and calculate variable and fixed overheads using the high-low method.

You're reporting an error for "IMAC – MAR 2023 – L1 – Q5 – Budgeting | Cost Segregation and Estimation"

IMAC – July 2023 – L1 – Q1 – Cost-Volume-Profit (CVP) Analysis | Process Costing

Prepare the Process Account for Omicron vaccine production and calculate the break-even point and required units to achieve target profit before and after tax

You're reporting an error for "IMAC – July 2023 – L1 – Q1 – Cost-Volume-Profit (CVP) Analysis | Process Costing"

IMAC – MAR 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis

Discuss tasks suitable for piece rate and hourly rate payment systems and compute labor variances and standard costing variances.

You're reporting an error for "IMAC – MAR 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis"

IMAC – MAR 2023 – L1 – Q3 – Marginal Costing and Absorption Costing | Scope of Management Accounting

Explain qualities of management accounting information, and differences between marginal and absorption costing.

You're reporting an error for "IMAC – MAR 2023 – L1 – Q3 – Marginal Costing and Absorption Costing | Scope of Management Accounting"

IMAC – Mar 2023 – L1 – Q2 – Budgeting | Cost and Cost Behaviour

Prepare functional budgets for sales, production, and direct material purchases for Naa Sei enterprise.

You're reporting an error for "IMAC – Mar 2023 – L1 – Q2 – Budgeting | Cost and Cost Behaviour"

IMAC – Mar 2023 – L1 – Q1 – Pricing

Calculation of the production cost and selling price per loaf of bread, including direct materials, labor, and overheads.

You're reporting an error for "IMAC – Mar 2023 – L1 – Q1 – Pricing"

Our offerings

Contact Info

Customer

Get In Touch

admin